Michigan State University Extension released a Margin Goal Worksheet to help farmers identify crop profit margins and margin goals for grain marketing decisions.
Profit margins and margin goals are important for identifying potential grain profits and can guide planting intentions. Crops are raised to be marketed at profitable prices, meaning operating costs are covered and the farm has money left over for cash flow needs such as debt payments. Profits can also cover non-farm expenses, including family living costs.
Looking at profit margins on a per-bushel basis helps determine if market prices offer enough profit for these additional needs.
Once total cash flow needs for each crop are calculated, a per-bushel cost can be determined by dividing those expenses by the crop's total production—yield multiplied by acres. The per-bushel cost is often referred to as a margin goal. Margin goals illustrate the additional profit margin needed to cover cash flow needs or non-production costs.
To use the worksheet, farmers need futures price, basis charge from local grain buyers, yield estimate, cost of production estimate, cash flow needs including debt principal and family living estimates, percent of cash flow needs covered by crop and acres to be grown.
